Reverse Mortgages are Just Another Marketing Scheme…
Posted by mjcross
A “reverse” mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:
- all at once, in a single lump sum of cash;
- as a regular monthly cash advance;
- as a “credit-line” account that lets you decide when and how much of your available cash is paid to you; or
- as a combination of these payment methods.
No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.
On the surface it sounds too good to be true…that’s because it is. The problem with these products is that they assume the consumer will be thrifty with their lines of credit. Lenders say that people must simply be ‘prudent’ with their money and not get carried away with spending. The problem is nobody conducts themselves like that. You can’t trust the average starry-eyed American consumer. What usually happens is that reverse mortgages wind up becoming a titanic burden in a few short years because people who enter into them spend the equity on such necessities as vacations, SUV’s, and gambling. Furthermore, not all mortgage products are HUD approved so there is truly no recourse for borrowers or lenders in some situations.
With all the recent talk of lending reform, reverse mortgages have not been mentioned at all. Congress continues to ignore the fact that predatory corporations will try just about anything to write mortgage paper, even if that means bankrupting an unsuspecting middle class. No help there as usual. However, something does need to be said about the people who pursue these loans.
There is no free lunch America. If you buy an over-valued house that you ultimately cannot pay for, then you should be held accountable and suffer long-term consequences. This may be the only thing to wake consumers up to the reality of this economy. Recent legislation that proposes bailouts and guarantees for people who were caught in predatory ARMs is a slap in the face to responsible people like myself, who don’t look for the ‘quick fix’. I say let at least some of these people burn in the name of reeducating American consumers in the area of spending and finance.
Since when has it become a right for American consumers to heap their bad judgement on the government? Since when is acceptable for people to make consciously destructive short-term decisions in the name of luxury they cannot afford? Why is it that people in this country can’t see twenty years into the future and realize that what they are doing will drive them to eat dog food for dinner when they can’t work anymore because they refuse to save a nickel for retirement?
I contend that reverse mortgages are just another scam with an eye on propping up a hopelessly debt-driven economy that will crumble in our lifetimes, as more and more people face a penniless retirement. Leaning o equity and needless spending is not the answer.
Posted on September 26, 2007, in Economic Policy, Law, Politics, Social Policy and tagged AARP, anti-reverse mortgage, Debt, Economy, generational debt, Home Finance, Retirement, Reverse Mortgages, Seniors. Bookmark the permalink. 25 Comments.